...
Usually
, where
and
is number of years past.
The main idea of NPV is to start wth the statement that value of cash today is higher than value of cash tomorrow because immediate cash can be safely invested today invested readily available investment market opportunities and start brining some profit.In a sense, NPV is showing a value of given investment as against competition in the form of the available market investment opportunities
NPV dictates that commercial project should not only be just profitable but instead should be on par with or more profitable than easily available investment alternatives
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